A company that generates cash isn’t automatically a winner. Some businesses stockpile cash but fail to reinvest wisely, limiting their ability to expand.
Cash flow is valuable, but it’s not everything - StockStory helps you identify the companies that truly put it to work. Keeping that in mind, here is one cash-producing company that reinvests wisely to drive long-term success and two best left off your watchlist.
Two Stocks to Sell:
Johnson Controls (JCI)
Trailing 12-Month Free Cash Flow Margin: 9%
Founded after patenting the electric room thermostat, Johnson Controls (NYSE: JCI) specializes in building products and technology solutions, including HVAC systems, fire and security systems, and energy storage.
Why Does JCI Fall Short?
- Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
- Earnings per share lagged its peers over the last two years as they only grew by 3.8% annually
- Below-average returns on capital indicate management struggled to find compelling investment opportunities, and its shrinking returns suggest its past profit sources are losing steam
Johnson Controls is trading at $111.86 per share, or 24.3x forward P/E. Check out our free in-depth research report to learn more about why JCI doesn’t pass our bar.
Bread Financial (BFH)
Trailing 12-Month Free Cash Flow Margin: 52.1%
Formerly known as Alliance Data Systems until its 2022 rebranding, Bread Financial (NYSE: BFH) provides credit cards, installment loans, and savings products to consumers while powering branded payment solutions for retailers and merchants.
Why Do We Steer Clear of BFH?
- Sales tumbled by 6.1% annually over the last two years, showing market trends are working against its favor during this cycle
- Earnings per share have contracted by 3% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
At $69.10 per share, Bread Financial trades at 7.7x forward P/E. If you’re considering BFH for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Arlo Technologies (ARLO)
Trailing 12-Month Free Cash Flow Margin: 10.7%
Originally spun off from networking equipment maker Netgear in 2018, Arlo Technologies (NYSE: ARLO) provides cloud-based smart security devices and subscription services that help consumers and businesses monitor and protect their homes, properties, and loved ones.
Why Could ARLO Be a Winner?
- Operating margin improvement of 13.5 percentage points over the last five years demonstrates its ability to scale efficiently
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 120% over the last two years outstripped its revenue performance
- Free cash flow margin expanded by 16.5 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends
Arlo Technologies’s stock price of $13.53 implies a valuation ratio of 18.7x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
If your portfolio success hinges on just 4 stocks, your wealth is built on fragile ground. You have a small window to secure high-quality assets before the market widens and these prices disappear.
Don’t wait for the next volatility shock. Check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.
